Reassessing the negative impact of hosting the 2020 Olympics

The estimated cost of the 2020 Olympic Games has increased astronomically since Tokyo won the right to host it. On Dec. 22, Asahi Shimbun reported that the estimated price could be as much as ¥1.8 trillion. The original bid estimate for constructing new Olympic venues was ¥499 billion and that is now ¥680 billion. Transportation costs have increased from ¥23.3 billion to ¥140 billion, security from ¥20.5 billion to ¥160 billion and “software” expenses from ¥257 billion to ¥520 billion.

Of this, the Tokyo 2020 Organizing Committee has said it will pay ¥500 billion, meaning that the remaining ¥1.3 trillion will be split somehow between Tokyo and the central government, which doesn’t want to pay anything because, according to the Olympic charter, the games are the responsibility of a city, not a country.

When people complain about the high cost, supporters of the games respond by saying that the Olympics will bring a lot of money to Tokyo and, by extension, Japan. This argument is couched in terms of keizai kōka, or “economic effectiveness.” According to the March 7 edition of the Nihon Keizai Shimbun, Tokyo estimates the nationwide economic effectiveness of the 2020 Games to be ¥32.3 trillion over an 18-year period from 2013 to 2030. In addition, the Olympics will generate 1.94 million jobs during that period.

Initially, this money would be in the form of direct investment for things associated with the Olympics: ¥5.2 trillion for the country, of which ¥3.4 trillion would be spent in Tokyo. Then, after the Olympics have finished, there would be money generated through the games’ legacy, which would bring ¥27 trillion to the country, of which ¥17 trillion would go to Tokyo. Most of the direct investment would go into construction of venues, as well as security operations, transportation and marketing. Legacy effectiveness would be in the realms of transportation and other new infrastructure maintenance, barrier-free measures, tourism, revenues for use of venues built for the Olympics and increased interest in sporting events.

A representative of the Tokyo prefectural government told the Nikkei Shimbun that these figures were based on the economic effectiveness resulting from the 2012 Olympics in London, but admitted that they were subject to variables such as changes in economic growth and the “Olympic backlash.” The Bank of Japan made a more sober assessment, saying it expected a total increase of up to ¥30 trillion in GDP due to the Olympics from 2014 to 2020, which would calculate out to about ¥4 trillion a year. The Mizuho Research Institute was a bit more optimistic, saying the cumulative Olympic-related GDP increase for this period would be ¥36 trillion.

However, sportswriter Masaru Ogawa brought up an important point in a piece in the March 13 Tokyo Shimbun. All the estimates for economic effectiveness take into consideration the “positive” side of the balance sheet and none of the “negative” aspects. It’s important to remember that some people’s and organization’s livelihoods will be adversely affected by the Olympics, and none of those possible effects have been factored into the keizai kōka numbers. For instance, some media have reported how the Japan Exhibition Association sent a petition with 80,000 signatures to Tokyo Gov. Yuriko Koike in January asking that the Olympics cut back on its use of the Tokyo Big Sight convention and exhibition complex, which will house the main media and broadcast centers for the Olympics. The association’s members will not be able to use the facility, one of the largest of its kind in Japan, to stage exhibitions for at least 20 months, and will thus lose an estimated ¥1.2 trillion in sales. Tokyo is now studying the feasibility of building a makeshift exhibition center in the vicinity, but it would only be about one-fourth the size of Big Sight and cost about ¥10 billion.

Ogawa outlines other areas of negative economic impact. While the Athletes Village is open for business a large-scale security campaign will be in force throughout the city. A good portion of this campaign involves limiting traffic so as to prioritize Olympics-related vehicles and fortify anti-terrorism measures. Such limitations will infringe on the activities of businesses, in particular those that rely on distribution of goods throughout Tokyo. The security situation will also discourage people from shopping or dining in Tokyo.

In terms of public money, Ogawa mentions that Tokyo tax revenue normally used for welfare and education will be diverted to pay for sports venues that will either be torn down right after the Olympics or maintained with even more public funds. For instance, construction and rehabilitation of facilities outside Tokyo, whose costs were not added until after the city won the right to host, will eventually cost Tokyo taxpayers ¥200 billion, even though they receive no direct benefit from them because of their remote location. Money for welfare and education go directly to residents, who spend it on goods and services that benefit the city’s economy as a whole. Construction and maintenance costs, however, go straight into corporate coffers with no guarantee they will trickle down into the economy.

In his 2016 book about the Olympics, Smith College professor Andrew Zimbalist discusses the “illusion” of economic effectiveness associated with the games and applies them to Tokyo. Zimbalist points out that no host city since 1960 has ever stayed within its proposed initial budget — Athens, he says, ended up spending 10 times — and, in fact, in order to pay off some of the enormous debt generated by the games, many ended up slashing public services, including those related to health and education, in order to stave off bankruptcy. Even the much-ballyhooed windfall of increased tourism is deceiving. During the summer of 2012, London actually saw a net 6.1 percent decrease in visitors compared to 2011 due to security jitters, thus negatively affecting theaters, concert halls, museums and retail outlets.

Media critic Minako Saito, in an online review of Zimbalist’s book, says host cities understand this negative dynamic when they shape their bids and purposely try to emphasize lower costs, which will invariably rise with time. The International Olympic Committee understands it as well. The bid itself is a symptom of the problem, since it diverts human resources, such as public officials, engineers and laborers, from other, more productive economic activities.

Sportswriter Ogawa says we need to take a “broader view” of the economic effectiveness of the Olympics, and not just in terms of how much money is moving from one pocket to another. It’s a valid assertion, but a bit too late. Such considerations should have been discussed openly before Tokyo even made a bid for the games.

Yen for Living covers issues related to making, spending and saving money in Japan on the second and fourth Sundays of the month.